Opinion - northwest_view

POSTED: Sunday, Oct. 11, 2009

Tax initiative in Colorado is an example of what not to do

To find out what Washington would look like if Tim Eyman's latest initiative, 1033, is adopted in November, you don't have to travel far. Eyman's proposed overhaul of our state's way of raising the revenue to meet people's needs contains the same toxic ingredients as a law that wrecked Colorado's economy and ability to provide for education and health care.

Colorado voters approved this law in 1992, only to vote to along strongly bipartisan lines to suspend portions of it later because of the damage inflicted on the Rocky Mountain state's schools, transportation infrastructure and health care system.

It seemed to many like a good idea at the time. Growth of state and local revenues would be limited by a rigid formula based on two factors: inflation and population growth. Never mind that the way of measuring inflation doesn't take into account the actual costs of education, health care and other services; never mind that overall population growth fails to consider age makeup (kids and older people use far more services than do 30-somethings).

After a few years of living like this, here's what happened to Colorado:

- The state fell to 49th in the nation in school funding.

- Road and bridge construction and repair shriveled to where 40 percent of the state's roads and highways were in disrepair and more than 100 bridges were found to be structurally deficient.

- Pre-natal health care in the state dropped to 48th.

Would things be different in Washington under I-1033? There's no reason to think so. Eyman's latest attack on Washington's state and local governments uses the same type of formula for restricting the growth of spending that caused so much damage to Colorado - no exceptions, no ability to react to emergencies or changes in major trends, just a one-size-fits-all formula.

In fact, Washington likely would fare even worse than Colorado. When Coloradans approved their law, at least the state economy was stable. But Washington's economy today is seriously weakened by a devastating national recession. Unemployment is way up, families struggle to stay afloat and the need for many important services has risen just as revenues have dropped by record-breaking proportions. Overly restrictive limits like I-1033 on the state's ability to help people will only make it harder to dig out of this recession and put us in poor position for when prosperity returns.

To compound the trouble, I-1033 contains a nasty little surprise, like bits off glass in your mashed potatoes.

Call it the ratchet effect. When state, county and city revenues decline, as they have across Washington State, under the I-1033 formula the resulting lower level of spending becomes the base for the following year's limit. The impact would be felt for years to come, severely hampering government's ability to ever catch up to pre-recession spending levels - regardless of people's needs.

If you put it into kitchen-table terms, you can see why I-1033's formula just doesn't make sense. Say the recession has caused your pay to be cut by 10 percent. Just as the economy starts to pick up, your boss announces that you won't get a raise ever again, just a three-percent cost-of-living increase - no matter how much the economy grows or how hard you work. Your former rate of pay is gone forever, and a cost of living increase won't keep up with the rising costs of gas, health insurance, groceries or college tuition. That's not such a good deal.

Colorado's law did nothing for the state's economy either. In fact, after the last recession Colorado recovered much more slowly than neighboring states. Among the seven Rocky Mountain region states from 2001 to 2006, Colorado's job growth was a meager 0.2 percent compared with the regional median figure of 9.3 percent.

In Washington, I-1033 would choke even tighter the limited resources for education, healthcare, assistance for senior citizens, state and local infrastructure and governments' ability to meet emerging needs.

As we enter this debate about using rigid formulas as a means to constrain public services, we have an advantage that Colorado didn't. We can learn from their experience, I-1033 is a proven failure.

Carol Hedges works for the Colorado Fiscal Policy Institute; Remy Trupin the Washington State Budget & Policy Center.